Does the industry need to agree a standard for the publication of income protection claims statistics?
We have been publishing statistics for many years. If we believe, as an industry, that it is a worthwhile thing to do, it is best to publish like for like. Otherwise you get into circular arguments about whether one is comparable with another.
But there is a wider issue, which is whether publishing the claims stats actually really helps or not?
It raises the profile to the point where people look at it and say ‘you are paying 90 per cent of claims, why are you not paying 100 per cent?’. We have to get to that space where we can explain we are never going to pay 100 per cent because there are always a small number of people will fraudulently claim and if we were to pay out on those it would turn into a tax on the people who are honest.
We are always going to get some claims where people aren’t really entitled to claim but they will put the claim in anyway.
You could put a process in place where you triaged out those claims but the risk is that you set the system so that you triage out one or two genuine claims. That is too high a price for me.
Do you expect to see a drop in protection sales in the first half of this year due to the amount of business pushed through in the run up to G-Day and the I minus E pricing changes?
There certainly was a large spike in business right at the back end of last year. With I minus E, effectively if you increase the tax on a product someone has to pay for it somewhere along the line and there are very thin margins on these products. Having said that, the vast majority of customers underestimate the cost of protection so the cost is not a deterrent.
We will see a clearing out of pipelines, a lot of the organised advisers will have contacted clients in advance and will have accelerated that business into 2012 and that had an impact in early January.
We are seeing the volumes coming back already and by the half year I would hope they will be not too much impact from the gender and I minus E changes.
Will the introduction of the new Consumer Insurance (Disclosure and representation) Act make a difference to LV=?
I do not think so. With the guidance coming out of the ABI in the last few years and the way we operate, we are pretty much to that standard as it is. This is more about codifying what is already happening.
One of the reasons we have seen claims stats improve over the last 10 years is that all providers have been looking to improve that process so there is a minimal chance of people non-disclosing.
Do you think that income protection should have been included in the list of simplified products outlined by the Treasury?
Not until there is agreement on it.
There is a lot of discussion going on and different providers have different views on risk appetite and different ideas about how you simplify the proposition and how it interacts with state benefits. It is a much, much more complicated discussion than if you are talking about simple term assurance.
Whether as an industry we can agree on what constitutes a viable, simple product for income protection, I am not entirely sure.
But it is a very, very good debate to have because even if we don’t as an industry, I am sure that individual companies will. It brings it to the forefront and increases the profile of it, so whatever it results in, the process will have a positive outcome.
What single measure would you like to see introduced to improve the protection market?
To get disclosure commensurate with risk. One of my biggest concerns is that we have to provide a customer with so much paper they can’t but believe the product is more complicated than it is and they will never read it and understandably will forget what it is they have bought. As a customer you can receive 30 pages just for simple term assurance which you can describe in two sentences.
There is something seriously wrong with that and we have tried to have been so definitive to ensure there is no chance that anyone ever misunderstands, we have forgotten that the reason for it was to try and look after consumers.